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Wednesday, May 28, 2014

Market Thought... Confused.

The ten year yield is collapsing. (Sign of weak economic growth or flight to safety via geopolitical fear.)

Yet the Vix has approached the levels not seen since 2007. (Or a level of complacency not seen since the great mortgage manipulation.)

The combo is allowing for markets to be at all time highs, while at elevated multiples. 

I wish I was smart enough to understand but I don't. And it scares me. 

The complacency could be a consequence of central bank activity, but the lower rates are coming at a time when the Fed has cut its purchases by quite a bit.  So it may suggest a far more slower US economy, in concert to a slower global economy.  This is in contradiction to what the SP500 earnings estimates (for q2-q4) are projecting. 

So yeah, the equity market is acting pretty healthy, but with complacency and fear at the same time. 

Thursday, May 22, 2014

Market Thought... rising multiple

Q1 earnings have not been so hot, yet the market multiple keeps rising. Find this odd, considering the lack of tightening anticipation. For almost a year the SP500 has traded with a trailing multiple north of 18. Normal range is 15-17, and we are above normal.  

The below chart simply shows the trailing PE vs the quarterly high market target.

At some point over the next 6 months the market will factor in tightening, and a multiple reversion is to be expected. (The decline in the 10yr yield is most likely playing a role in keeping the multiple elevated.)

The technicals, in relation to the vix, is a concern. At an interim basis, the vix hit a low today.

On a long-term basis, the vix is very near the lows.

Earnings estimates have earnings coming in at an impressive clip for the remainder of the year, and if they hold up, the SP500 should close the year out well north of 1900. Because of this, I'm not expecting some crazy declines from here. (Barring China issues or Russia starting WWIII.) Simply expecting some multiple contraction, in anticipation to the tightening, which can cause a 3-5% market correction.


Tuesday, May 20, 2014

$amzn - bounce or break

Here. We. Go. 

Would like to see a bounce, but given the new found negative chatter, a flush out would not be surprising.

Tuesday, May 13, 2014

@cramer $amzn vs Alibaba thesis is crap

The arguement pitting Amazon and Alibaba together is easy, but a bullshit one.

1. Amazon does not have a profit problem. They have a spending problem.

In 2011, amzn chose to increase spending on Fulfillment, Technology and Content.

2. The pay-off comes in the form of faster growth against its peers. 

-latest numbers from Channel Advisors

On the enterprise side, they are seeing exponential-like revenue growth.

Alibaba has impressive financials. But the biggest takeaway from their filing was the lack of Western expansion. (China Mobile is also listed in the US many years ago. Still do not have a presence here.) Alibaba is focused on the greatest economic shift the world has ever seen: consumerism with a target population of all the United States. That is a big market, the growth of which has truly just begun.

If amzn is considered "pricey" compared to Alibaba, so should Facebook and Google. And if those two keel over, as market leaders, the rest of the nasdaq will too. 

The fact is, Alibaba should be priced at +$150B, but the underwriters most likely do not want to fuck this up, so its pricing is generous. (Its really a +$200B market cap company, if not more.)

The one major concern surrounding Alibaba is Alipay. Alipay's reach is simply awesome and scares me. Alibaba, through its web of companies (although Tianhong Asset Management is not found in the filing), its one of the largest money managers in China and on the planet. (Not a comforting position considering the financial shock concerns facing China.)

I am a fan of both Amazon and Alibaba, and I am talking my book on both.

AMZN is testing a long term support.

Update: comScore Q1 2014 e-commerce numbers were just released. Below is how it relates to amzn. (Does not include mobile.)


Tuesday, May 6, 2014

$twtr is interesting here

Technically, it should start seeing consolidation here, but structural confirmation is needed.

Its grossly oversold. A bounce should not exceed 35-37.5. If a pullback from the 35-37.5 level creates a higher low, from the high 29s, then twtr will have structural confirmation.

Fundamentally, twitter is seemingly worth more than Whatsapp. (Defiantly worth more from a revenue perspective.) From a flexibility-of-potential-revenue stream, it's potentially valued more too. (Whatsapp has no intention to become a gimmicky-social-messaging service like so many pooping up in Asia. That limits their potential.)

Sunday, May 4, 2014

What's with the $tnx? Ukraine

Despite decent US economic data, the 10yr treasury yield is flat to down. Not the scenario an investor would except.  But every week Russian escalates there self-made situation in the east of Ukraine.  The geo-political uncertainty increases with the increased rhetoric between the Russia and the US (the two countries with the largest nuclear weapon stock piles).

As a side note: S&P revised estimates suggest earnings for the 1st quarter are not coming in as expected. This maybe playing a role too, but earnings are still pretty healthy. (SP500 targets are based on the est reported earnings.)